Daily Market Reports | Apr 03 2012
By Greg Peel
The Dow closed up 52 points or 0.4% while the S&P gained 0.8% to 1419 and the Nasdaq added 0.9%.
Are you a tech geek? Last night a lesser known broking firm updated its forecast for Apple shares. Apple closed 2011 at US$405ps, closed last night at US$618ps, and the 12-month target price on this new report is US$1001. That extra dollar is the iPad 3 you're about to buy. Yes, you over there. One wonders whether this will be the year Mr Jones finally decides the world's largest company by market cap really should be in the Dow, forcing more buying.
Back in the real world, Wall Street loved Beijing's official manufacturing PMI result which sparked plenty of “soft landing” talk, and a better than expected US PMI also helped kick the June quarter off on a positive note. The rest of the world, however, provided some mixed results.
An attempted rally in Australia lost steam yesterday and the fall in the local manufacturing PMI to 49.5 from 51.3 in February provided some impetus. March ended three months of timid expansion. China, as we know, posted 53.1 (51.0) while over in Europe things were predictably dour with the eurozone PMI falling to 47.7 (49.0). Within the balance, the world's biggest exporter of manufactured goods – Germany – saw a 48.4 result and France fell even deeper into contraction at 46.7.
There was better news in the UK however, with that PMI rising to 52.1 (51.5) while the US rise to 53.4 (52.4) beat consensus expectations of 53.0.
It was all a bit of a bonanza for Britain, as the combination of solid local, Chinese and US numbers helped the FTSE to a 2.3% gain. The Europeans seemed to shrug off their own results too as the German index rose 1.6% and the French 1.1%. The Dow was up as many as 85 points before meeting some typical late selling.
It wasn't all good news for the US nevertheless, with February construction spending showing a worse than expected 1.1% fall. The argument is now raging as to whether US economic data on the whole really are that great, which would likely mean no QE3, or whether, as Bernanke suggests, things are still pretty sluggish, which is enough to spur on those believing QE3 is inevitable. April is typically a good month for equities as tax returns and new 401K (super) money are funnelled into stocks but there are those out there who think April is the new May when it comes to that old selling adage. We'll be able to read the minutes of the last Fed meeting tonight and Good Friday will bring the latest US jobs numbers.
Another widely held expectation in the US is that of the inevitable release, at some point, of US strategic oil reserves. The inevitability is not related to Iran per se but rather to the simple fact it is an election year. January gasoline demand numbers for the US released last night showed a sharp decline, yet the positive PMI data for China and the US were enough to send Brent up US$2.51 to US$125.39/bbl last night and West Texas up US$2.15 to US$105.17/bbl.
Base metals in London were also encouraged and copper rose 2%, while gold added US$9.40 to US$1678.10/oz. The US dollar index was off a tad at 78.85 while the Aussie has picked up 0.6% to US$1.0423.
It is a truth commonly held on Wall Street that the bond market is “smarter” than the stock market. The bond market tends to be more ahead of the curve, and it's not that difficult to appreciate given trading in Treasuries is more of a game for professionals while inexperienced retail investors get swept up in shares. Last night the US ten-year yield fell 2bps to 2.19%, which is not a lot but belies the recent trend of stocks up, bonds down (in price). The bond market is looking more warily at Europe than the stock market at present.
Today in Australia sees retail sales and a rate decision from the RBA. Despite a flurry of rate cut talk following the central bank's recent Stability Review, which seemed to have a more dovish tone, surveys of economists are indicating a widely held belief the RBA will stay on hold today. And we will also see China's non-manufacturing PMI released today.
The SPI Overnight rose 27 points.
Last but not least, Rudi will be on Sky Business' Lunch Money this Thursday, between 12-1pm and again on Switzer TV later on the day, between 7-8pm.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit. Click here.
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
